ContractsProf Blog

An Almost Too-American Story About the Pope’s Childhood Home

Step 1: On May 9th, Nicholas Bogel-Burroughs and Debra Kamin reported for The New York Times that Pope Leo XIV’s childhood home was up for sale. The current owner purchased the house in Dolton, a South-Chicago suburb, just last year for $66,000 and renovated it. It went on the market for $199,000, but the market was tepid. That changed once news of its papal heritage got out. The offers, many above asking price, started rolling in. In response, the owner pulled the house from the market, the broker for the deal stated, hoping to do more research on the house to learn of the extent of the Pope’s connection to the property.

I’m not sure I quite get the attraction of owning such a home. I fear that the appeal might be commercial, like that you could turn the home into a museum and charge admission, but I would think zoning laws would have something to say about that. As the Times report cited above notes, celebrity homes do not always hold their value. Someone paid $2.14 million to purchase Donald Trump’s childhood home in Queens in 2017, but it fell into disrepair and was resold in March for $835,000. Somehow, I think if the owner had turned over the property to the Trump family, they would have gotten a lot more for it. it would be a meme coin by now.

Step 2: Ms. Kamin returned to the story a week later to report that the house was now to be sold via auction. Perhaps learning from Ms. Kamin’s reporting with Mr. Bogel-Burroughs from the week before, the realtor teamed up with the same auction house that sold Mr. Trump’s childhood home. As the realtor explained, “This is the best chance for selling it for top dollar and also getting the most amount of exposure.” A representative from that auction house was gleeful: “We can call this the pope premium. Within one week this is going to be the most famous home on the planet. What the highest and best bid will be, or who it will be from, is anyone’s guess.” Poor Leo. It’s not quite the message that I think his Papacy was shooting for.

Step 3: Not even a week later, Ms. Kamin and Matt Yan had new information to share. They reported that the Village of Dolton is now going to purchase the property, perhaps exercising the power of eminent domain. “The Village intends to work with the Chicago Archdiocese and other agencies to allow the home to be viewed and visited by the public as a historic site.”  It seems that the auction is still open, and the Village of Dolton is hoping to have the high bid so that it does not have to exercise its powers of eminent domain.

Predicted Step 4: We’ll see how this goes, but I foresee litigation. If the auction price becomes unreasonable, Dolton will resort to eminent domain. The seller, the realtor, and the auction house will then sue, claiming that that the auction establishes the market price for the property, and anything below that is a taking.

The New York Times on Zombie Contracts

We’ve been trying to follow the work of the new Department of Government Efficiency (DOGE). Back in March, we posted about DOGE’s somewhat mysterious claim that it was “cancelling” contracts and leases. As we noted, most parties cannot “cancel” a contract. Unilateral cancellation of a contract is a breach. This is the government, so things are different, but not that different. Parties with the resources and the patience can pursue administrative remedies when the government wrongfully terminates a contract. 

Last week, David A. Fahrenthold and Jeremy Singer-Vine wrote in The New York Times about what they have called "zombie contracts,” that is, contracts that DOGE supposedly cancelled that were reinstated. Sometimes the reinstated contracts are expanded or extended, rendering them more expensive than they were before.

This is fairly small potatoes. The Times has identified 44 zombie contracts, and the total value of the contracts is $220 million. According to its website, DOGE claims to have saved taxpayers $165 billion, which would be impressive if true, but is still, by my math, only 16.5% of its goal of shaving $1 trillion from the federal budget of $7 trillion in a few months. Of course, as chronicled elsewhere, DOGE has taken credit for cancelling contracts that had already been shut down by previous administrations, or it has claimed to have cancelled contracts when it really was just not renewing them. According to BBC Verify, only $61.5 billion in savings have been itemized, and despite the “Wall of Receipts," there are receipts accounting for just over half that amount. 

The existence of zombie contracts should surprise nobody. Just as with Twitter, Elon Musk’s strategy is to cut everything that seems to him wasteful and then to backfill when he discovers that the cuts have gone too far. And you can easily imagine how they might become overzealous. For example, listen to this DOGE employee, best known as “BigBalls,” explaining how he discovered waste. 

DOGE may not be as transparent as it claims to be, but its employees certainly are. They are tireless, they are dedicated, and they are uniform in their ideology. They believe that they are serving their country, and they are making personal sacrifices to do so. They are convinced that the people who work at the agencies that they are demolishing are engaged in systematic waste, fraud, and abuse. They think that they are uncovering $20 million outlays for which there is no evidence of purpose and no accountability. I’m afraid that simply doesn’t track. The receipts on the "wall of receipts” are for actual things. What I see when I watch the video is people who do not understand a system assuming the worst about that system and thus concluding that the things that they don’t understand are simply unnecessary.

It seems that many of the reinstated contracts that The Times has identified were reinstated because DOGE discovered either that they were required by law or that they were for essential services that the agencies could not accomplish on their own. It strikes me as quaint that the administration is reinstating contracts just because it would be illegal to cancel them. More recently, under its very robust version of the unitary executive theory, the administration seems to operate on the principle that the President can terminate any program or agency within the executive branch, notwithstanding the Take Care Clause.

But the real story here is not the zombie contracts or the elimination of waste, fraud, and abuse. The real story is the reduced footprint of the federal government. Whether or not DOGE becomes a permanent fixture in our government, many government programs have been shuttered, and they will not be immediately revived, at least not in their current forms. It may be that states and private entities will take up the work that the government used to do. That decentralization will no doubt give rise to its own inefficiencies, if not new forms of waste, fraud and abuse. 

Brave new worlds.

UPDATE: The two New York Times journalists cited above have published a follow-up on their earlier article. Some of the zombie contracts had been removed from DOGE’s list of its accomplishments. Some remain on the list. Meanwhile, DOGE added 800 new “cancelled” contracts to the list and claimed an additional $5 billion in “savings."

May Day: Federal Judge Backs Federal Workers Union and Enjoins Executive Order

On March 27th, the President issued an Executive Order entitled Exclusions From Federal Labor-Management Relations Programs (the EO). That same day, the Office of Personnel Management (the OPM) issued a Guidance on Executive Exclusions from Federal Labor Management Programs (the OPM Guidance) implementing the EO.

Last Friday, in a two page Order in National Treasury Employees Union v. Trump, Judge Paul Friedman (below right) enjoined the defendants from effectuating Section 2 of the EO and enjoined the defendants from effectuating the OPM Guidance. The President was excepted from the scope of the injunction. I’m not sure what that means, and the explanatory opinion doesn’t explain. Judge Friedman's explanatory opinion followed on Monday.

Section 1 of the EO determines that branches of the federal government listed in Sections 2 and 3 of the EO "have as a primary function intelligence, counterintelligence, investigative, or national security work.” Section 2 lists  some agencies for which the statement seems preposterous, e.g.: Health and Human Services, the Department of Agriculture, Department of Commerce, the EPA, the National Science Foundation, the FCC, the General Services Administration, the Social Security Administration, and the Office of Personnel Management. Section 1 then provides that Chapter 71 of title 5, United States Code, which allows for collective bargaining and union representation for federal authorities, cannot apply to employees in the listed agencies.

The OPM Guidance implements the EO and other policies of the current administration designed to strip federal workers of job security and protections that have become a standard part of federal employment law since World War II. Among other things, it clarifies that the purpose is to facilitate the termination of federal employees deemed to be “underperforming.” The OPM Guidance directs agency heads to cease participating in grievance procedures and arbitrations provided for in collective bargaining procedures. With respect to on-going arbitrations, they are to cease and the employees are to be terminated.

In his 46-page opinion issued on April 28th, Judge Friedman, laid out the clear inconsistency between Congress’s directive in the 1978 Federal Service Labor-Management Relations Statute (FSLMRS) and the EO, which effectively deprived 2/3 of the federal workforce of their rights to collective bargaining. The FSLMRS took national security into account and empowered the President to suspend the rights protected in the statute on national security grounds. Presidents have done so in the past, but not in a way that approached the scope of the EO.

As is its wont, the Administration’s first response is to contend that its actions are not reviewable by the District Court. Rather, the National Treasury Employees Union (NTEU) must pursue its claims using the administrative review scheme that Congress created, the Federal Labor Relations Authority (FLRA). That would be true, Judge Friedman noted, except that the EO itself removes the agencies and subdivisions at issue in this case from the FSLMRS, thus stripping the FLRA of jurisdiction to hear complaints brought by NTEU employees in those agencies and subdivisions.

Sure, the Administration countered, if the NTEU tried to challenge the EO in the FLRA, that claim would dismissed for wont of jurisdiction, but then the NTEU could appeal that decision to a U.S. Court of Appeal. Judge Friedman noted that the government's argument misses the point. Because the effect of the EO is to remove the case from the jurisdiction of the FSLMRS, nothing bars the District Court from exercising jurisdiction.  Some day, someone will write a Catch-22-style black comedy about the Administration’s standard moves to evade review of its lawlessness.

On the merits, things get really interesting. The meat of the opinion focuses on the NTEU’s likelihood of success on the merits. In a similar case from the Reagan era, the D.C. Circuit upheld President Reagan’s exclusion of the U.S. Marshall service from the protections offered by the FSLMRS. The District Court had struck down President Reagan’s Executive Order because he had provided no justification for the move. The D.C. Circuit reversed, according the President the "presumption of regularity.”  Here, Judge Friedman analyzed two issues: 1) whether the current EO was entitled to a presumption of regularity, and 2) whether the President had acted ultra vires. 

Judge Friedman found that the NTEU had rebutted the presumption of regularity by presenting clear evidence that “the President was indifferent to the purposes and requirements of the [FSLMRS], or acted deliberately in contravention of them.” This was so because, the EO contradicts Congressional findings from the FSLMRS and because the EO’s purposes were retaliatory and designed to effectuate policy goals unrelated to the FSLMRS. On the final point, the OPM Guidance is telling, as it makes scant reference to national security, the supposed animating purpose behind the EO. Rather, it emphasizes the need to eliminate bloat, waste, and inefficiency in the federal government, returning to its DOGE-inspired mantra.

The rebuttal of the presumption of regularity suffices to justify the grant of the injunction that NTEU sought. However, Judge Friedman also concluded that the EO was ultra vires because it provided no ground for thinking that any of the affected agencies and subdivisions have “national security work" as their “primary function.” The EO arrives at this conclusion by defining the relevant terms so broadly as to encompass virtually any governmental function. The remaining factors of the test for granting a preliminary injunction go pretty quickly, once the likelihood of success on the merits has been established.

The NTEU’s work in briefing these issues is impressive. Overcoming the presumption of regularity and persuading a court to overrule executive determinations regarding national security is no small task. In introducing each section Judge Friedman notes how high a mountain NTEU has to climb in order to prevail in its arguments. But Judge Friedman carefully scales those heights, relying on close readings of strong precedents as he ascends.

There has never been a more anti-union President. There has never been a more anti-worker President. There has never before been a President who cared so little about the plight of ordinary employees. Prior to the election, 60% of members of the Teamsters Union supported the current President. How do they like him now? Perhaps they think that it will all be worth it when manufacturing jobs to the U.S. We’ll have to watch and wait to see how that goes.

Recap of Administration Attempt to Fire Employees of the Consumer Financial Protection Bureau

Early in the administration, it looked like the Consumer Financial Protection Bureau was being singled out for harsh treatment, bordering on demolition. Now, it looks more like the CFPB is being treated like most administrative agencies that protect against industry abuses or discrimination. Still, the CFPB is different because it and its employees are supposed to be insulated from hostile administrations. This post provides on update on the back and forth between the administration and the courts in the CFPB’s struggle for survival. This topic if a moving target, so this update likely will not be the last.

The latest round began when CFPB director Russel Vought (right) announced that the agency would lay off over 1400 of its 1700 employees.  As Judge Amy Berman Jackson noted in an April 18th Order, that action came within four days of a decision by the D.C. Circuit that was informed by the government’s "representations that the Bureau would continue to perform its mandatory statutory duties and that it was engaged in nothing more than a typical reevaluation of policy priorities at the start of a new administration rather than the wholesale elimination of an agency.” 

Without quite saying so, Judge Jackson (left) clearly thinks that the government cannot be trusted. Its actions were inconsistent with the representations made to the D.C. Circuit and with the D.C. Circuit’s relaxation of Judge Jackson’s earlier order. Moreover, Judge Jackson determined that "a RIF that will decimate the agency and render it unable to comply with its statutory duties is underway” and that it would be completed before any court could make a determination on the merits of its legality. She entered a new order on April 18th suspending the agency action and prohibiting the agency “from discontinuing any employee’s access to work systems, including email and internal platforms."

I don’t know whether the CFPB is continuing to function. A court can order the government not to fire employees, but what are those employees to do if the directors of the agency refuse to carry out its functions?

Update: As I learned from Chris Geidner on Law Dork, the D.C. Circuit Special Panel, which hears emergency appeals, issued a new Order on Monday. The government had sought clarification of what constitutes a "particularized assessment” of whether the dismissed CFPB employees’ were necessary to the performance of the agency’s statutory duties. The panel responded by reinstating a part of the District Court’s injunction that had been stayed. The government will remain enjoined from further RIFs until the merits of the challenge to those RIFs can be adjudicated.

Chris Geidner notes that Judge Gregory Katsas, White House counsel, appointed to the D.C. Circuit by the current President and White House Counsel during his first Presidency, joined in the 2-1 majority. That is a striking evolution. Even people at the heart of the first iteration of the current President’s attempts to dismantle constitutional legal norms now see just how dangerous the threat to separation of powers and the rule of law has become. Not so dissenting Judge Naomi Rao. She wants to f around with the CFPB and find out whether a 1700-employee agency with significant regulatory duties mandated by Congress can still fulfill its mission with only 200 employees.

Doing It Wrong (Columbia) and Doing It Right (Georgetown)

On Monday, we contrasted Paul, Weiss's Neville Chamberlain-esque capitulation to the government with the bravery of a third-year associate who called upon her firm and others like it to stand up to the government. Today, we contrast Columbia University’s capitulation to Georgetown’s resounding articulation of principle in the face of threats from the government that aimed to chill constitutionally protected rights to free exercise and free expression. Columbia needs to get some religion.

On March 7, various governmental agencies announced that they were pulling $400 million in funding to Columbia University, "due to the school’s continued inaction in the face of persistent harassment of Jewish students.” On March 13, the administration sent Columbia a list of its demands. Some of those demands were not unreasonable. The administration demanded that  Columbia enforce its disciplinary procedures. Others were quite outrageous. The administration demanded that the university abolish its university judicial board and centralize disciplinary proceedings within the office of the university president. It also demanded that the Middle East, South Asia, and African Studies Department be placed under “academic receivership” for at least five years.  

It should go without saying that the federal government has no business meddling in the internal affairs of a private university. It’s a free country. Anybody can criticize university leadership. No doubt, Columbia, like many campuses, in light of last year’s protests, has undertaken significant soul searching about how to balance the rights of free expression, academic freedom, and public safety on campus. Tying research funding to its agreement to adopt the administration’s preferred approach to such matters, at the very least, raises questions at the intersection of private and public law. Columbia could have challenged the government’s authority to tie funding to compliance with the administration’s demands. It is hard to imagine that any court would have upheld the government’s power to withhold funding for scientific research because it likes the smell of pepper spray first thing in the morning on campus visits.

Troy Clossen reported in The New York Times on Friday that Columbia chose capitulation in the form of a four-page, unsigned letter. As a graduate of Columbia University, this turns my stomach. Fell0w graduate, Alexander Hamilton, would not have thrown away his shot so easily. A chill wind is now sweeping university campuses across the country. The odious Chris Rufo crows, “This is only the beginning.” 

It is not like Columbia had no models for how a university might respond. Interim U.S. Attorney for the District of Columbia Ed Martin sent a threatening letter to the Dean of Georgetown Law School. Here is how Dean Treanor responded in part:

Your letter challenges Georgetown’s ability to define our mission as an educational institution. It inquires about Georgetown Law’s curriculum and classroom teaching, asks whether diversity, equity, and inclusion is part of the curriculum, and asserts that your office will not hire individuals from schools where you find the curriculum “unacceptable.” The First Amendment, however, guarantees that the government cannot direct what Georgetown and its faculty teach and how to teach it. The Supreme Court has continually affirmed that among the freedoms central to a university’s First Amendment rights are its abilities to determine, on academic grounds, who may teach, what to teach, and how to teach it. . . .

Your letter informs me that your office will deny our students and graduates government employment opportunities until you, as Interim United States Attorney for the District of Columbia, approve of our curriculum. Given the First Amendment’s protection of a university’s freedom to determine its own curriculum and how to deliver it, the constitutional violation behind this threat is clear, as is the attack on the University’s mission as a Jesuit and Catholic institution.

Bravo, Dean Treanor.

That DOGE Won’t Hunt

I am fairly confident that the federal government wastes money. It's a very large organization, with access to very large amounts to money. There is inevitably going to be waste. Many politicians have been elected claiming that they will reduce such waste. It’s not an easy task. The Department of Government Efficiency (DOGE) has taken a Ready! Fire! Aim! approach to the problem. Early on, The New York Times reported, DOGE boasted that it had “canceled” $55 billion in contracts, but days later The Times also reported that those numbers were wildly inflated. It’s next move, as Jacob Sullum noted on Reason, was to make new claims of savings but to make its reporting system less transparent. The new numbers were nonetheless also challenged, e.g. by David A. Fahrenthold and Jeremy Singer-Vine, here. So, according to the same duo of New York Times journalists, DOGE reverted to more transparency.

Meanwhile, courts have already stayed some DOGE actions. The list is long and ever-expanding, so I once again recommend the JustSecurity blog’s litigation tracker. It seems unlikely that the government saves money by firing people, getting sued, and then having those people reinstated. To make matters worse, according to Eileen Sullivan and Isabelle Taft, reporting in The New York Times here, the administration does not seem to want the reinstated employees to work, so it is placing them on administrative leave, literally paying them to do nothing. Unless you value the work of federal employees below zero, this approach seems unlikely to increase government efficiency. 

Currently, DOGE claims to have saved the government $130 billion. I don’t believe it, but I have no idea what, if anything DOGE has really accomplished. Frankly, it is exhausting trying to follow their claims, the revelations of their incompetence or misstatements, their new claims, retractions, renewed claims. But I have been wondering what it means when a government agency claims to have “canceled” a contract. As we’ve discussed before, when private parties claim to have canceled a contract, they are in breach and will have to pay provable damages if there any.

I have no experience in government contracting. Obviously there are differences. I reached out to colleagues in the field, and what I've learned is below. In short, the government can get out of contracts more easily than private parties, but it is not pain free. Aggrieved parties will have to seek remedies through administrative rather than legal procedures, at least initially. However, as so much of what DOGE has done seems to be clearly ultra vires, I think the actual savings as a result of all of this chaos will be very limited. The costs and human suffering are hard to measure. I have no confidence that this duo knows what it is doing, at least when it comes to achieving government efficiency. At times like this, it is important to remember, with these guys, as Adam Serwer observed, the cruelty is the point.

So some theories as to what is really going on, from the most favorable towards DOGE to the most skeptical:

• At least some canceled contracts are simply contracts that will not be renewed, and canceling them generates real savings to the extent that they are multi-year contracts for which money had already been allocated;
• Some canceled contracts might be either long-term supply contracts or at-will employment agreements that the government can cancel without breach;
• Government contracts generally allow for “termination for convenience” (TFC), explored in more detail below;
• Drawing on their experience as well-financed bullies in the private sector, administration officials know that they are in breach/are acting ultra vires and expect that many contractors or employees will not have the stomach for a fight; and
• This is not about efficiency; it’s about optics.

I am especially dubious about DOGE’s claims that it has canceled leases. Last week, a trio of New York Times reporters, David A. Fahrenthold, Madeleine Ngo, and Jeremy Singer-Vine reported that DOGE had silently dropped 136 of the 700 canceled leases from its website, lowering its estimated savings by 30%. This change seems to be a product of pushback within the Trump administration. The other shoe will drop, I presume, when the property owners sue for back-rent or when administrative agencies have to find new office space. National Public Radio reports that DOGE wants to sell government buildings and lease them back. I understand that such a transaction can be attractive for private businesses. I don’t understand why it would be beneficial for the government to engage in such transactions. Property law folks, please weigh in! 

About a month ago now, David B. Dixon and Michael R. Rizzo published this explainer on the Pillsbury Law website. Parties whose contracts with the government are canceled can bring claims under the Impoundment Control Act (ICA) when funds are appropriated for specific purposes but then not spent. However, such claims have limited efficacy because contracts with the government allow for TFC, and the administration can often rely on such clauses to justify seeming violations of the ICA, so long as the contract terminations are in good faith. If contracting officers do not exercise "independent business judgment" in connection with terminations, aggrieved parties can bring claims under the Contract Disputes Act.

Aron C. Beezley and Nathaniel J. Greeson provide more details in a recent article in The National Law Review. They cite cases illustrating TFC terminations can be challenged when: used to correct the government’s own procurement mistakes; to allow the government to walk away from an unfavorable deal; to steer government business towards preferred vendors; when the government invokes the TFC clause in bad faith or arbitrarily or capriciously. Damages might be limited to costs incurred before termination plus profits on work completed. Lost profits on canceled work may be awarded in cases of bad faith termination. Reinstatement of contracts is rare. Under the Equal Access to Justice Act, some contractors can recover attorneys’ fees and costs. So, in short, much of the claimed savings may be clawed back and it will take years to sort it al out.

There are ways to improve government efficiency. They are not flashy. They are slow and painstaking, but they yield results. Those results will not generate headlines, unless of course DOGE decides to shut down the agencies like 18F that actually do promote government efficiency or inspectors general who can legitimately claim to have saved the government $93 billion in a single year. 

Thanks to the many contractsprofs who shared their expertise with me or tracked down information, including Andrea Boyack, Laura Heymann, Richard Neumann, Heidi Mandanis Schooner, and Frank Snyder.

District Court Finds White House Cannot Fire Independent Counsel by Executive Order

On Saturday, we posted a brief note that a District Court in California found that the Federal Office of Personnel Management had no authority to fire federal workers in other agencies. That is undoubtedly true. It may not be very significant, however, as it would just be a matter of the Administration finding the right bagman to do the bidding of the President or Elon Musk or whoever is really calling the shots these days. The tough question in that case was whether the court had jurisdiction to hear the claim. Statutory schemes provide that federal workers must bring their wrongful termination claims to the Merit Systems Protection Board, and appeals are channeled to the Federal Circuit. The unions' claims in that case were dismissed on that basis, but plaintiffs also included organizations with standing that were not federal employees and thus were not subject to channeling of their claims through the Merit Systems Protection Board.

Bessent v. Dellinger has already made its way to the shadow docket of the U.S. Supreme Court (SCOTUS). A District Court entered a temporary restraining order (TRO) enjoining the government from firing Mr. Dellinger (right), who is the Special Counsel in the Office of Special Counsel, which protects federal whistle blowers. TROs are generally not appealable. The government brought an emergency motion to stay that TRO, first before the D.C. Circuit Court and then, citing the All Writs Act, before SCOTUS. After providing a procedural history of the case, Chief Justice Roberts, writing for the majority, decided “in light of the foregoing,” to hold the case in abeyance, pending further action from the District Court. Two liberal Justices would have denied the application for review. Two conservative Justices dissented from the “holding in abeyance” because the District Court did not provide adequate explanation of the equitable grounds for its grant of relief.

As Will Baude and Dan Epps hilariously point out in the most recent episode of their podcast, Divided Argument, the typical complaint about the shadow docket is that, in that abbreviated format and without the benefit of full briefing, SCOTUS decides cases without giving its reasons for doing so. In short, it does something for no reason. In this case, the Court did nothing for no reason.

And it was still 5-4.

This is peak shadow docket. The two liberal Justices who wrote separately would have done something for no reason. The two dissenting conservative Justices would have done something else because the District Court did something for no reason. “That’s our move!” cry the dissenters.

Well, over the weekend, the District Court gave its reasons in Dellinger v. Bessent, permanently enjoining the Administration from firing Mr. Dellinger, who by statute may only be removed for "inefficiency, neglect of duty, or malfeasance in office.” The curt letter that notified Mr. Dellinger of his immediate dismissal gave no reason at all. This doing something for no reason thing is contagious.

We are interested in this case as it touches on statutory protections for employees of the federal government, and so there is not much more to say that is of interest from the perspective of contracts law. This is the tip of the iceberg as far as the litigation goes. The Administration’s legal argument that it is entitled to remove employees of the executive branch notwithstanding statutory protections rests on the Unitary Executive Theory, recently discussed by Cass Sunstein in The New York Times. My own humble contribution on this subject can be found here. Ultimately, the Court will decide whether it is consistent with the structural Constitution for Congress to require the President to give some reason for sacking the person tasked with protecting federal employees who allege wrongdoing within the federal bureaucracy from retaliatory conduct, perhaps by the alleged wrongdoers.

The District Court in Dellinger v. Bessent does not address the Unitary Executive Theory by name. Rather, the Court writes as follows:

In sum, it would be antithetical to the very existence of this particular government agency and position to vindicate the President’s Article II power as it was described in Humphrey’s Executor: a constitutional license to bully officials in the executive branch into doing his will.

The citation to Humphrey’s Executor is ominous. As Cass Sunstein notes, the Administration’s Acting Solicitor General has already put Congress on notice of the Administration’s intention to challenge that case. This may be the first case to make it to SCOTUS that will give the Administration a shot at removing all statutory protections of workers at federal agencies. The argument, in short, is that because the Constitution's Article II vests “all executive power” in a single President, the President must be empowered to both appoint and dismiss any employee within the executive branch. Not all scholars, and not even all originalists, agree that the laconic Article II Vesting Clause demands to be read in that way and that way alone. But if you think that result makes sense or that we are bound by it whether or not it makes sense because . . . originalism, Jonathan Gienapp wants a word.

In my view, this is one of those cases where appealing to original meaning just doesn’t make sense. Eighteenth-century sources tell us nothing about a federal bureaucracy grown vast beyond the Framers’ imagining. In such circumstances, we are left to our own devices. It is appropriate for courts to defer to the constitutional solutions devised by the political branches (see Hamilton in Federalist #78) empowered to liquidate constitutional meaning in practice (see Madison in Federalist #37). In an organization as large as the modern executive branch of our government, it makes sense to have internal ombudsmen, like the Special Counsel, who can check against abuses of power. It also makes sense to insulate those people from arbitrary removal by those whose conduct they review. That has been our practice for decades, and courts bowed to such practices, even when they disagreed with them, going back to Stuart v. Laird (1803).

Contract Rights Are Human Rights

Never before has the importance of protecting contractual rights against abuse by government officials in this country been more urgent. Judge Alsup gets it.

 

DC District Court Concludes It Has No Jurisdiction over Claim to Nazi-Looted Art

Two weeks ago, we posted about a Ninth-Circuit decision to allow Spain to retain possession of a Pisarro painting that the Nazis stole from a Jewish refugee. Today, we report that another court dismissed the claim of a plaintiff seeking the recovery of Nazi-looted art. Last September, in the latest chapter in a twenty-five-year saga in Hungarian and U.S. courts, the DC District Court in de Csepel v. Republic of Hungary granted Hungary’s motion to dismiss plaintiff’s attempt to recover a sixteenth-century limewood statute of Santa Barbara. I can’t find a non-copyrighted image of the statue, but Santa Barabara is depicted at right in her tower, and below left, being beheaded.  

The statue in question was part of the Herzog Collection which survived intact until 1944 when the Hungarian government cooperated with the Nazis in its seizure. Since 1949, the statue has been in the possession of Hungary’s Museum of Fine Arts. The museum’s website describes the statue as follows:

According to the legend, Saint Barbara, who lived in the third century, was locked up in a tower by her own father, a heathen. Barbara, however, secretly converted to the Christian faith and later suffered a martyr’s death. The statue of the saint, who is depicted holding her attributes (namely a tower and a palm branch symbolising her martyrdom), was probably been made in the early sixteenth century and can be linked with the art of Michel Colombe, a sculptor working on the border between late Gothic and early Renaissance. The work can be placed among the statues made in the Bourbonnais region under the influence of Colombe. It has the typical features of the so-called Bourbonnais facial type: the curly hair parted in the middle, the convex forehead, the small almond-shaped eyes, and the narrow mouth. The nearest analogy is a stone statue of Saint Barbara in Jaligny, but in terms of artistic quality the work is closest to the art of Jean de Chartres, a pupil of Colombe.

Like in the case from two weeks ago, foreign sovereign immunity posed a barrier to recovery. In addition, in this case, the court also concluded in the alternative that it lacked jurisdiction under the forum non conveniens doctrine.

Hemmed in by previous decisions relating to the requirements of the Foreign Sovereign Immunities Act (FSIA), the Court had to determine whether plaintiffs’ prior claim that their predecessors were de facto stateless precluded them from climaing that their predecessors were de jure Hungarian citizens at the time the Santa Barbara statue was stolen. The Court concluded that plaintiffs were not estopped.

However, that victory could get plaintiffs from the frying pan to the fire. If plaintiffs’ predecessors were Hungarian citizens and the Hungarian officials stole the Santa Barbara, plaintiffs’ claims would be barred under the domestic takings rule. Here, plaintiffs created a factual issue as to whether it was the German authorities or the Hungarian authorities that took the sculpture. In fact, the evidence suggests that the Germans were responsible, and so the domestic takings rule would not bar recovery.

Still, plaintiffs had to show that the theft of the statute violated some international legal norm so as to bring the claim within the FSIA’s expropriation exception to sovereign immunity.  More specifically, it was plaintiffs’ burden to show that the statue was taken during the Nazi occupation of Hungary, which began in 1944. If the Nazi theft occurred during the occupation, it was an act of pillage and a violation of the international law of war unprotected by the FSIA’s carve-out for takings by the domestic government. Unfortunately, the specific issue that plaintiffs have to show is that, in 1944, it was a violation of the international law of expropriation to seize a foreign national’s property during wartime. Drawing on precedent from the U..S Supreme Court in Germany v. Philipp and the International Court of Justice’s judgment in Jurisdictional Immunities of the State (Germany v. Italy), the Court notes that the wartime seizures of private property did not violate the international law of expropriation at the time the statue was stolen. And so, in the end, plaintiffs were not able to bring their claim within an exception to sovereign immunity, and the Court lacked a basis for jurisdiction over their claim.

In the alternative, the Court also dismissed the claim based on forum non conveniens. While a previous judge had rejected defendants' forum non conveniens argument, the facts had changed. The only remaining plaintiffs in the case are now both Italian nationals residing in Italy. The statue remains in Hungary, and the Court concluded that Hungary is the more convenient forum in which the parties can litigate the claims relating to the Santa Barabara sculpture.

For whatever its worth, the Court rejected many of Hungary’s alternative arguments for dismissal. Plaintiffs could not have pursued their claims in Hungary, and so they were not subject to an exhaustion requirement. The Court also declined to declare plaintiffs’ claims time-barred at the summary judgment stage. Some of those holdings might prove useful should the Court’s main holdings be overturned on appeal.

Alleged Oral Agreement Regarding Toby Keith Does Not Waive Immunity

Still catching up on older cases. This one was decided in July.  

In City of Pharr, Texas v. Garcia, the court devoted very little time in its memorandum opinion on rehearing to the facts. Francisco E. Jimenez provides some background in this 2020 story on MyRGV.com. Mr. Garcia seems to be the principal behind Pajaro Productions (Pajaro) a local production company, which claims to have entered into an agreement with the city in 2014 in connection with a Toby Keith (left) concert. The concert did not sell out, and the parties lost a lot of money. Pajaro alleged the City failed to pay its $400,000 portion of the losses. Mr. Garcia also alleged that he had not been paid in connection with a $300,000 deal that he had negotiated for the City for naming rights for the City’s Events Center.

The City argued that the court lacked jurisdiction. The agreements, said the City, were verbal, and the law does not permit the waiver of governmental immunity through oral agreements. Government instrumentalities enjoy immunity when they act as a branch of the government but not when they act in a “proprietary, non-governmental” capacity. Texas law defines “proprietary functions” as . . . 

those functions that a municipality may, in its discretion, perform in the interest of the inhabitants of the municipality.” TEX. CIV. PRAC. & REM. CODE [ANN.] § 101.0215(b). Statutorily, proprietary functions include, but are not limited to, “the operation and maintenance of a public utility,” “amusements owned and operated by the municipality,” and “any activity that is abnormally dangerous or ultrahazardous.” Id.

A city performs a government function when it acts in the interest of the general public. 

I would just note that there is considerable overlap between these two supposedly distinct capacities of government instrumentalities. Maintaining public utilities is an action in the interest of the general public, or so one would hope. To make matters muddier, “amusement services,” including musical concerts are, by definition proprietary functions, but maintenance of venues is a designated government function, according to the Texas Torts Claim Act. In fact, the distinctions that the court relies upon between proprietary and governmental functions all relate to the Tort Claims Act. The court nonetheless ruled that the contracts related to the City’s governmental functions. Mr. Garcia did not allege that the City expressly waived jurisdiction.

However, waiver is automatic under the Local Government Contract Claims Act whenever the local government enters into a contract covered by the Act. One problem: The Act does not cover verbal agreements, and the court was persuaded that the contracts at issue here were verbal. If that is true, it is shocking. These contracts involved hundreds of thousands of dollars, and the Toby Keith concert was a complicated affair, involving multiple parties. How can it be that none of it was reduced to writing? If any readers know the underlying facts of the case, I would love to learn more.

As Go Twitter Employees, So Go Federal Employees?

Image by DALL-E

It is now clear that Elon Musk used the template that he employed to purge Twitter to engineer whatever it is the Department of Government Efficiency (DOGE) is doing to the federal bureaucracy. As Kate Conger and Ryan Mac report in The New York Times, he didn’t even bother coming up with a new slogan. Employees at Twitter and the federal government were informed that they had come to a “fork in the road."

Federal employees were given until February 6th to decide whether to resign, currently extended until February 10th and likely to be further extended, given all the legal challenges, some of which we summarized in yesterday’s post. In exchange, such workers were offered full pay and benefits through September 30th, although it seems possible that some employees who choose to leave federal service might be required to stay on for some time to facilitate a transition. So far, The New York Times reports, 65,000 federal workers have taken the offer. Nearly 150,000 federal worker retire voluntarily each year, So far, 3% of the workforce has accepted the offer; Mr. Musk said that the target was 10-15%. 

Other employees were offered the opportunity to stay at their jobs without any guarantee that their jobs would continue to exist. Such employees were promised that they would "be treated with dignity and will be afforded the protections in place for such positions.” I would not find it motivating if my boss informed me that my job security was gone but that I would be treated with dignity. Why should I need assurances that I will be treated with dignity? Perhaps because one of the people giving me my termination notice goes by the Internet handle of “Bigballs”. Another stepped down from is position with DOGE after a Wall Street Journal reporter revealed his history of outlandish racist Tweets. But never fear! Vice President Vance, whose wife is Indian American, spoke  for the young man who posted the slogan “Normalize Indian hate," and Musk himself called for his return to DOGE, while also demanding that the Wall Street Journal reporter be fired. Yay free speech?

So how did things work out at Twitter? Well, if Mr. Musk was investing in Twitter in order to make it profitable, he clearly has not done well, although it is hard to get reliable information about a privately-held company. According to Kate Conger and Ryan Mac (see link above), Fidelity estimates that the company has lost 72% of its pre-acquisition valuation. Mr. Musk did cut staff by 80%, but some reports suggest he had to hire a lot of new people and the staff is now inching towards 40% of its pre-Musk total. That’s not indicative of failure, however. Mr. Musk’s strategy is to cut to the bone and then replace as needed. If he doesn’t have to increase staff, it just means he didn’t cut enough in the first place. But there is some evidence that the cuts harmed the company. Use of the site is stagnant, new ideas that were supposed to generate revenue do not seem to have panned out. The company’s forays into live streaming have been plagued with glitches.

Increasingly, it seems that Musk’s goal in acquiring Twitter was not to make it profitable, nor was it to champion unfettered freedom of expression. Rather, Mr. Musk may have wanted to control a social media platform to expand his ability to connect to the public and to help promote views to which he is sympathetic. It may be giving Mr. Musk too much credit to suggest that the Twitter acquisition was itself a dress rehearsal for DOGE, but clearly at some point it dawned on him that it could become a model.

So what can we learn from what happened at Twitter? Clare Duffy and Hadas Gold report on CNN that the road for former Twitter employees has been long and rocky. In the case of the Twitter refugees, many claim that Twitter has not made severance payments to which they are contractually entitled. In the case of department government employees, the problem may be that the Office of Personnel Management, which issued the Fork in the Road memo, doesn’t actually have authority to make deals with federal employees, nor does it have congressional authorization to pay out seven months of severance.

Twitter has been able to keep its dispute resolution with former employees under wraps, as most employees were bound to arbitrate their claims. That option will not be available to the federal government, and the law suits have already begun, as we noted in yesterday’s post. Those suits might lead to injunctions, preventing DOGE or OPM from enacting the lay-offs it proposes. In the meantime, there will be very public wrangling over the legality of the administration's actions. Some federal employees resigned after “clashing” with DOGE employees over access to public information. 

My prediction, for whatever that is worth, is that it will not be so easy for the administration to rid itself of federal workers. The protections are too well-established. That said, the cases will eventually find their way to the Supreme Court, which has been willing to hear high-profile political cases on an expedited basis. We will than find out how deeply the Court has imbibed the unitary executive theory cool-aid. I can imagine a world in which the Court rules unconstitutional all Congressional limitations on the President’s power to hire and fire employees of the executive branch. At that point, we will really find out what happens when DOGE gets to treat federal employees the way Mr. Musk treated Twitter employees. Perhaps it will be great, and our dollars will be as valuable as Bitcoin. Or perhaps we will come to regret the association of our government with Doge.

Federal Workers, Unions, and Government Accountability Watchdogs Sue the Government

Hats off to the JustSecurity Blog, where its editors have created a litigation tracker covering all current cases filed against the Trump Administration, complete with docket links. It’s a wonderful resources, so thanks to all who contributed!

For our purposes, the important cases are those relating to the treatment of federal employees. Just Security provides short summaries of those cases. Here, we add just a quick summary of the legal issues in the cases. Links are to the complaints in each action

In National Treasury Employees Union v. Donald J. Trump et al., the National Treasury Employees Union (NTEU), a labor union representing employees in 37 federal agencies and departments in grievances and litigation and in negotiating collective bargaining agreements, filed suit in the D.C. District Court. NTEU challenges a January 20, 2025 Executive Order, which the complaint characterizes as depriving federal employees of civil service and due process protections, permitting the President to fire them at will. NTEU contends that the Executive Order exceeds executive authority and frustrates congressional intent. Congress granted the President limited authority to prescribe rule for federal workers, but only as necessary and as conditions of good administration warrant. Because the Executive Order was neither necessary nor in service of good administration, it was ultra vires. The Executive Order is also impermissibly overbroad in that it applies to career employees not subject to regulation by the President. It also deprives federal authorities of their procedural due process rights under the Fifth and Fourteenth Amendments. The procedures authorized under the Executive Order are inconsistent with the regulations that govern the Office of Personnel Management (OPM). NTEU seeks an order enjoining the President and other named defendants from implementing the Executive Order.

In Government Accountability Project v. Office of Personnel Management, the Government Accountability Project (GAP), along with the National Active and Retired Federal Employees Association, sued in the D.C. District Court to enjoin the same Executive Order at issue in the NTEU case, designed to strip career civil servants of employment protections created by Congress. OPM Director Charles Ezell, a named defendant in this and the NTEU case, issued a Guidance that reclassifies federal employees so that they can be terminated at will.  This complaint is written with more flair, providing choice hyperbolic quotes from administration officials in which they characterize federal employees as a cancer and calling for mass dismissals. The complaint characterizes the Executive Order as reversing 150 years of progress against the spoils system and returning the United States to an era when all civil servants were hired based on political patronage and personal loyalty.  The complaint provides a history of civil service regulation going back to the 1883 Pendleton Act. It alleges that the Executive Order and OPM Guidance violate the Administrative Procedures Act (APA), The Civil Service Reform Act (CSRA), and the Fifth Amendment’s Due Process protections. The OPM Guidance violates the APA because they were not promulgated in compliance with "notice and comment" requirements. The Executive Order is invalid because it is inconsistent with Congressional enactments protecting civil servants. The court has equitable powers, the complaint alleges, to enjoin unlawful executive actions. The plaintiffs seek declaratory judgment and ask the court to vacate the Executive Order and OPM Guidance.

Public Employees for Environmental Responsibility v. Donald Trump et al. was filed in the District Court of Maryland. This one is brought by Public Employees for Environmental Responsibility (PEER), working with Democracy Forward and Citizens for Responsibility and Ethics in Washington (CREW). The basis for the complaint is the same as in the first two cases discussed above. The complaint here provides an even deeper dive into the civil service reform movement to combat the spoils system, from the 1883 Pendleton Act through the 1978 CSRA. The Complaint then details regulations that implement those reforms in the service of a simple goal: career civil servants are to be selected on the basis of merit and are not removed simply on account of their political views or those of the president. It then reviews the history of Donald Trump’s attempts to gut the civil service, going back to a 2020 Executive Order that was never implemented and citing his repeated statements that he would destroy what he calls the “deep state.” There follow specific allegations of how the new Executive Order harms PEER and impedes its work.  The complaint alleges three counts of ultra vires executive actions in violation of the CSRA, regulations of the OPM, and procedural due process, and one violation of the APA. The complaint seeks declaratory and injunctive relief.

Finally (for this post), in American Federation of Government Employees, AFL-CIO and American Federation of State, County And Municipal Employees, AFL-CIO v. Donald Trump et al., plaintiff, The American Federation of Government Employees, AFL-CIO (“AFGE”), is the largest representing federal employees. It has been in existence since 1932 and now has about 800,000 members. This complaint is shorter, but it adds new details on the history of Donald Trump’s efforts, beginning with his 2020 Executive Order to reclassify federal employees under “Schedule F,” empowering him to fire them at will. Count 1 names OPM and Ezell and alleges violations of the APA. Count 2 alleges ultra vires actions by all defendants in violation of the APA’s notice and comment requirements. The complaint seeks declaratory and injunctive relief.

With the help of Just Security’s litigation tracker, we hope to post periodic updates on these suits and to provide summaries of others that are relevant to the government’s contractual relations with federal employees. Watch this space.

Law Dork on Revocation of Executive Order 11246

Chris Geidner, also known as Law Dork, reports on a Jan. 21, 2025 Executive Order that reversed an executive order from President Lyndon Johnson, designed to implement the 1964 Civil Right Act. LBJ’s Executive Order 11246 built on 25 years of prior enactments going back to FDR. FDR issued Executive Order 8802 to prevent military contractors from discriminating against black people seeking employment.

Combined with legislative enactments, Execuive Order 11246 provided the foundation underlying a sixty-year legacy of federal initiatives designed to combat racial discrimination and promote diversity, equity, inclusion, and accessibility in both governmental and private workplaces. LBJ expanded on FDR’s Executive Order to make it applicable "to every aspect of Federal employment policy and practice.“ President Obama expanded it to protect against discrimination based on sexual orientation or gender identify. As Chris Geider points out:

There should be nothing controversial about any of this. If certain policies or programs go too far, review them and fix them, but the fundamental basis for and nature of these policies began with the Civil War Amendments and were forged into modern America’s laws in the Civil Rights Era and the time since.

President George H.W. Bush signing
The American with Disabilities Act

It had come to be generally accepted that one should not discriminate against people on the basis of immutable characteristics. Over time, we came to recognize new categories of immutable characteristics.

And then came a backlash. Clearly, we are not, as a nation, united in our conceptions of which characteristics count as immutable. In addition, according to the new Executive Order, the need to combat discrimination of all kinds must be informed by the need "to promote individual initiative, excellence, and hard work.” 

Okay. I understand that language. That is, I am familiar with the rhetoric of white grievance, according to which different standards apply to so-called “diversity hires.” However, I was surprised to see that new Executive Order targets not only affirmative action and DEI initiatives but also accessibility. It seems that in 2025 we have entered into a world in which people in government think that having a disability is a lifestyle choice.

Wisconsin Judge Restores Collective Bargaining Rights to Some Public Employees

Act 10 was  landmark legislation for former Wisconsin Governor Scott Walker (right). In July, Judge Jacob Frost ruled unconstitutional the parts of Act 10 that  limited the collective bargaining rights of public workers on the ground that it treated police, fire fighters, and public safety workers differently from other public workers. The state presented no rational basis for the distinction. This aspect of Act 10 violated Wisconsin’s equal protection clause.

Yesterday, Judge Frost issued his final judgment in the case, Abbotsford Education Association v. Wisconsin Employment Relations Commission. The Wisconsin Legislature, which intervened in the case, urged the court to limit itself to a declaratory remedy, arguing that the court was without power to enjoin unconstitutional laws. The court found no authority supporting the Legislature’s position. The court's finding that parts of Act 10 are unconstitutional "requires the State and its officers to not enforce those unconstitutional portions of the law."

The Legislature next proposed that the court merely strike the Act's constitutionally offensive definition of “public safety officer,” leaving the term undefined and leaving the rest of the law in place. The Legislature proposed that the defendant agency and the courts could then supply a definition for the term. The court refused to do so, finding that neither it nor the agency had the authority to craft a definition. It was for the Legislature to come up with a definition that would pass constitutional muster, and it has not done so. The court then proceeded to strike the following sections of Act 10 as unconstitutional: 2011 Wisconsin Act 10 §§ 58, 95, 168–169, 182, 210, 211, 213, 215, 217–223, 225, 227, 230–236, 238–241, 242, 244–247, 250–252, 255, 259-262, 265, 267, 270-271, 273, 276, 283-284, 288–290, 293–296, 298-299, 303, 305–306, 308–312, 314–315,
319–322, 324–334, 366, 387-388. 

In the remainder Judge Frost provides explanations for his decision with respect to certain provisions, the constitutionality of which was the subject of disagreement between the parties. Judge Frost then proceeded to consider plaintiff’s request that the court strike sections of Act 55, which relate to provisions of Act 10 that were struck. Judge Frost granted plaintiffs request as to Act 55., granting plaintiff’s motion on the pleadings.

Rachel Ryan and Anthony Dabruzzi, writing in Spectrum News report that Former Governor Scott Walker was not well-pleased. He took to Twitter to express his outrage, denying that collective bargaining is a right and calling it an expensive entitlement. He suggests that the political branches, rather than the courts should make the law.  I trust that the Justices who joined the majority in cases like Heller, McDonald, Bruen, and Shelby County v. Holder are taking note.

Colorado Taxpayer Bill of Rights Provision Provides No Grounds for Breach of Contract Claim

Wound Healing: Achilles treats Patroklus

In 2018, the Center for Wound Healing and Hyperbaric Medicine of Burlington, Colorado (the Center) and Kit County Health Services District (the District) entered into an Administrative Services Agreement (the Agreement). Under the agreement, the Center established a facility at the county hospital, and the District was to pay the Center 80% of the District's net collections for hyperbaric care and $75 per wound care treatment performed at the Center, subject to a 3%/year increase. The Agreement originally had a seven year term, with provisions for acceleration of payments due in case of breach by either party. In order to comply with Colorado's taxpayer bill of rights law (TABOR), the Agreement provided:

[A]ny provision of the Agreement . . . that requires payment of any nature in fiscal years subsequent to the current fiscal year, and for which there are no present cash reserves pledged irrevocably for purposes of the payment of such obligations shall be contingent upon future appropriations by [the District] of sufficient funds for purposes of payment of such obligations for any future fiscal year.

In August 2020, the District became concerned about irregularities in the Center's submissions for Medicare reimbursement. The District then stopped submitting claims from the Center to Medicare for reimbursement. In June, 2021, the Center gave the District notice that it was in material breach of the Agreement. The District responded by terminating the Agreement and ceasing all payments. The Center then sent a demand letter, invoking the Agreement's provisions for accelerated payments. The District paid its June, 2021 invoice but made no further payments. The Center sued, seeking $8 million under the acceleration provisions. In 2023, the county hospital paid a $3 million fine to the U.S. Department of Health and Human Services for charging the government for services at the Center that were never performed or supervised as billed.

The District filed a motion in the trial court, alleging that the effect of the TABOR provision quoted above was that the District could not be liable where it had made no appropriations. It made no appropriations following the termination of the Agreement.  The trial court agreed and dismissed the Center's claims.

In Ctr. for Wound Healing & Hyperbaric Med. of Burlington, Colo. v. Kit Carson Cnty. Health Serv. Dist., an intermediate appellate court affirmed in part. In so deciding, the court did not need to consider TABOR. The above-quoted language rendered the Agreement TABOR-compliant. However, regardless of TABOR, the provision by itself provided that the acceleration clause would not be triggered where, as here, the District had appropriated no funds in connection with the Agreement. However, questions remained as to payments for services already rendered and as to whether there had been appropriations for the remainder of fiscal year 2021. The court reversed the trial court's entry of judgment to the extent that it precluded the Center from recovering unpaid sums that the Center claims correspond to fiscal year 2021 and remanded for further proceedings.

Derivative Sovereign Immunity Claim Fails in the First Circuit

By Sombrillaazul - Own work, CC BY-SA 3.0

In October, 2020, a group of au pairs sued Cultural Care, Inc. (Cultural Care), a company that places foreign nationals as au pairs with US host families. The allegations are about what you would expect -- violations of the Federal Labor Standards Act (FLSA), various state wage and overtime laws, and deceptive trade practices. Cultural Care responded that all claims against it are barred under the derivative sovereign immunity doctrine articulated in Yearsley v. W.A. Ross Construction Company, 309 U.S. 18 (1940). In that case, SCOTUS held that "there is no ground for holding [an] agent [of the Government] liable" for actions "authorized and directed" by the Government and taken "under" Government "authority" that has been "validly conferred." 

In August, 2021, the District Court rejected that argument, while dismissing some state law claims for lack of standing. Cultural Care brought an interlocutory appeal on the Yearsley issue and tried to bring others under pendant appellate jurisdiction. The resolution of the interlocutory appeal has turned out to be quite complicated, involving a request that the U.S. Department of State weigh in and two different First Circuit panels.

Image by DALL-E

In April 2023, Posada v. Cultural Care, Inc., the First Circuit affirmed the decision of the District Court as to Yearsley and found that it had no jurisdiction to hear anything else on an interlocutory appeal. Cultural Care's next move was a motion to compel arbitration.  Meanwhile, nearly 8000 individuals have joined the class making FLSA claims. The District Court denied that motion in February, 2024 on multiple grounds in Posada v. Cultural Care, Inc.

Some of Cultural Care's arguments seem to border on the frivolous. The arbitration agreement dates from 2023. None of the named plaintiffs signed it, and Cultural Care has submitted no evidence that any individuals who have opted into the suit have signed it. To the extent that Cultural Care moved to compel arbitration based on the 2023 agreement, its motion was denied without prejudice should Cultural Care be able to name individuals in the opt-in group to whom it would apply.

The District Court rejected more decisively Cultural Care's claim that plaintiffs were obligated to arbitrate in Switzerland because of a arbitration agreement they signed with a related company, International Care. Three years into the litigation, there is a strong presumption that Cultural Care has waived any right to arbitrate. Given that Cultural Care set out with gusto to have the case dismissed by a federal court, the District Court found the right to arbitrate waived. 

Even if that were not the case, Cultural Care is not a party to any arbitration agreement with plaintiffs. It argues either that it should have rights under the arbitration agreement between International Care and plaintiffs as a third party beneficiary or by reason of estoppel.  Under Massachusetts law, a third party beneficiary must present clear and definite evidence of the parties' intent that it benefit from the provision. Cultural Care could not meet that standard. 

The estoppel claim is once again borderline frivolous. Under Massachusetts law, "a nonsignatory may compel arbitration against a signatory where that signatory (1) “must rely on the terms of the written agreement in asserting its claims against the nonsignatory”; or (2) “raises allegations of substantially interdependent and concerted misconduct by both the nonsignatory and one or more signatories to the contract.” Cultural Care relies on the first argument, but the contract with International Care does not set out the terms of plaintiffs' employment by Cultural Care. In any case, plaintiffs bring only statutory claims, so they are not relying "on the terms of the written agreement in asserting [their] claims against the nonsignatory."

Motion to compel denied. Cultural Care has appealed, and the appeal has not yet been decided.  Plaintiffs are going to be old enough to need their own au pairs by the time any court rules on the merits of their claims.  We are well into justice delayed is justice denied territory.  If some court eventually rules that plaintiffs are entitled to some recovery, I hope there is some entity still  in existence that can pay them, and not just the attorneys. 

Fight Over Historic Black School in Charlotte-Mecklenburg

In 2007, the Torrence-Lytle School in Huntersville, North Carolina was transferred to the Charlotte-Mecklenburg Historic Landmarks Commission (HLC).  The school (facade image below, and back view farther down), originally known as the Huntersville Colored High School, was built in 1937 and expanded in the 1950s to add classrooms for younger students.  The building has not been used as a public school since 1966.

In 2016, and again in 2019, Tyson Bates and Regina Bates entered into contracts with HLC for the purchase of the property.  According to Nick de la Canal, reporting for WFAE Radio in North Carolina, the couple wanted to restore the facilities and open them to underserved children in the area.  They were never able to secure the property, and in 2022,  they sued HLC and its members, alleging eight causes of action, including breach of contract and breach of the duty of good faith and fair dealing. 

A trial court dismissed many of the plaintiffs' claims, but the breach of contract and breach of the duty of good faith claims survived, as did claims for negligent maintenance of a historic property, conversion and unjust enrichment.  On HLC's appeal, the Court of Appeals of North Carolina in Bates v. Charlotte-Mecklenburg Historic Landmarks Commission upheld the trial court's dismissals of some claims but it also dismissed, on governmental immunity grounds  all remaining claims against HLC and the individual defendants, except for the breach of good faith and fair dealing.  

The court granted most of defendants' motion to dismiss HLC and the individual defendants in their official capacities based on governmental immunity. The plaintiffs failed to allege a waiver of such immunity.  However, the court concluded, in a matter of first impression in the North Carolina courts, that governmental immunity doctrine does not cover claims for the breach of the duty of good faith and fair dealing.  The government is presumed to waive immunity to breach of contract claims whenever it enters into a contract.  Because the duty of good faith and fair dealing is an implied term in any contract, immunity is presumptively waived whenever a government entity enters into a contract.

The court extended immunity protections to the individual defendants in their individual capacities, because plaintiffs failed to allege that any of the individual defendants acted outside the scope of their duties or acted with malice or corruption.  Such allegations are required, under North Carolina law, to overcome the presumption of immunity for official acts.  For the same reasons, defendants could not be liable in their individual capacities for negligence or unjust enrichment.  However, conversion is an intentional tort.  As to the individual plaintiffs, only the conversion claim and the claim of breach of the implied duty of good faith and fair dealing survived the motion to dismiss.

Defendants sought leave through a writ of certiorari to challenge the trial court's denial of their motion to dismiss plaintiffs' breach of contract and breach of the duty of good faith and fair dealing claims, presumably on grounds other than immunity.  The court rejected these challenges as impermissible interlocutory appeals.  In sum, plaintiffs’ case will proceed on their breach of contract and breach of the covenant of good faith and fair dealing claims against all defendants and on their claim of conversion against the individual defendants in their individual capacities.

Continued Incredulity Over Snyder v. United States

I blogged about this case after oral argument, and SCOTUS produced the predicted 6-3 party-line endorsement of public corruption.  The opinion by Justice Kavanaugh amply illustrates just how inept this Court is at recognizing corruption.

James E. Snyder was elected Mayor of Portage, Indiana in 2011.  In 2014, Mr. Snyder accepted a $13,000 check from a company, Great Lakes Peterbilt (Peterbilt).  Federal prosecutors concluded that this payment was an illegal gratuity, paid to reward Mr. Snyder for steering a $1.1 million garbage truck purchasing contract to the company.  Mr. Snyder contended that the payment was for consulting services.  A federal jury believed the government's version of events, and a District Court sentenced Mr. Snyder to 21 months in prison.  The Supreme Court took the case in order to determine whether the relevant federal statute, 18 U. S. C. §666(a)(1)(B) covers gratuities, paid as a reward, as well as bribes paid in advance of some benefit that the recipient, a government official, provides to the payor.

Justice Kavanaugh (right), writing for the majority, considers "text, statutory history, statutory structure, statutory punishments, federalism, and fair notice," and concludes that the statute applies only to bribes, not to gratuities.  Indiana law may very well prohibit Mr. Snyder's conduct, but he was never prosecuted under Indiana law.  Nothing to see here, folks.

Justice Kavanaugh does provide cogent reasons for a narrow reading of the statute.  Two of the six Circuit Courts to confront the issue also concluded that § 666 is only about bribery and not about acceptances of gratuities.  He could have just gone with text, statutory history, and statutory structure, and the opinion would have been okay.  Justice Gorsuch briefly concurred, arguing that the scope of the statute is unclear, and in such cases, the rule of lenity counsels forbearance of prosecution.  

Instead Justice Kavanaugh engages in a meandering discussion of what he calls fair notice.  He is concerned about the possible overbreadth of the statute and its use to punish innocuous gifts, such as $100 gift cards at Dunkin' or students taking their college professors out for Chipotle or buying them tickets to a sporting event.  

Here my incredulity kicks in.  First, of course, the problem is not in taking gifts but in accepting them as a gratuity for some wrongful purpose.  I'm not sure politicians should be accepting giftcards from businesses if there is any connection between the gift card and public affairs in over which the politician has influence or decision-making power.  But if they engaged in such conduct, it would be the government's burden to convince a jury that a politician engaged in an act of official corruption in exchange for a $100 gift card at Dunkin'.  All Mr. Snyder had to do was show that he did some actual work in exchange for his $13,000 gratuity.  As the dissent points out, he made no such showing.  

It would not be a wrongful act if all of the students in a particular course or section bought their professor a meal or some other gift, so long as there were no connection between the gift and the grade.  

But I don't accept gifts from individual students.  First, I am comfortably situated, and my students are students. I would not want to contribute to a culture in which students think it appropriate to transfer wealth or resources upwards. I wouldn't want students to think that there were some expectation that they buy gifts for their professors.  I make an exception when student organizations give me small gifts for participating as a panelist or moderator for their events.  I make this exception as a cultural accommodation because they give the same gifts to all faculty members or outside speakers who participate.  I wish they wouldn't give me the gifts, but it would be awkward and churlish were I to reject the gifts that the students selected for me and which my colleagues accept.  However, I usually re-gift these things because otherwise I will forget about them, and they will collect dust in my office until I re-discover them years later.

Perhaps I would feel differently about these things if, like Justice Kavanaugh, I had attended elite private schools all my life in which many of my peers were far better off financially than their teachers.  But I think that says more about the lack of socio-economic diversity on the Court than it does about the ethics of the situation.

This isn't hard. I am well-compensated, and my power relations with my students are asymmetrical.  Students can't afford to buy me gifts, and I can't afford the appearance of impropriety that would arise should I accept their gifts.  

Not for nothing, on the subject of fair notice, it seems worth pointing out that Justice Kavanaugh joined the majority opinion in Campos-Chaves v. Goya, an immigration case decided less than two weeks before Snyder.  The issue in that case was whether immigrants can be ordered removed from the United States in absentia when they were not provided with the statutorily required "notice to appear."  That case actually was actually about notice and the stakes were higher than in Snyder.  After all, is it even plausible to think that Snyder, whose conduct could have been punished under state law, took a gratuity because he thought the federal statute only covered quid pro quo graft?  But in Campos-Chayes, Justice Kavanaugh agreed with the Majority that a later "notice of hearing" sufficed, even though the latter was to be provided only as a supplement to the required "notice to appear" in case of change or postponement in the time or place of removal proceedings. So, forgive me for thinking that Justice Kavaugh's commitment to the principle of notice is selective.

In any case, Justice Jackson, writing for the three dissenting Justices, has the better textualist reading of the statute, which punishes corruption, whether the improper payments involve quid pro quo influencing or post hoc rewards.  Her reading of the statutory history and the relationship of the statutory language at issue to other federal statutes covers material in depth where the Majority opinion barely scratches the surface.

Justice Kavanaugh expresses concerns about federalism, but Congress addressed those concerns when it passed the statute.  Yes, states are expected to police their own corrupt politicians.  However, when state entities accept federal funds, Congress  recognized a need (evident from this very case) for a federal supplement to state anti-corruption measures.  

Justice Kavanaugh worries about where to draw the line between corrupt and innocent gratuities.  That, Justice Jackson responds, is a question for another day, because Mr. Snyder is not arguing that what he did was innocent. He argues that the federal statute does not reach his conduct, even if it was corrupt.  Justice Jackson then proceeds to illustrate the statutory guardrails already in place to address the danger about which Justice Kavanaugh worries.  Nobody is going to jail for accepting a gift card, unless they do so "corruptly." Prosecutors, courts, and juries do pretty well distinguishing corrupt from innocent gifts. 

Finally, Justice Kavanaugh cites to evidence that bribery is a much more serious crime than taking gratuities corruptly.  He may be right that courts and statutory schemes make it so, but Justice Jackson points out that the two forms of corruption can be quite similar.  In this case, Mr. Snyder apparently shepherded a contract to Peterbilt and then showed up at their offices demanding a $15,000 payment because he needed money.  He got $13,000.  He characterized that payment as a consulting fee, but he also called it other things.  Peterbilt said that he never provided any services to them.  A jury likely concluded that Mr. Snyder was lying.  How is what he did any better than demanding the payment up front?  Should the law care whether I demand that you pay me $13,000 in order to steer a contract your way or demand that you pay me $13,000 once I have successfully steered a contract your way?

So, bottom line;  As a matter of federal law, it is not a crime for a state politician to accept after-the-fact gratuities in exchange for political favors.  In related news, as a matter of federal law, states and localities can make it is a crime to sleep in public.

Oklahoma Supreme Court Finds Contract for Catholic Charter School Violates the Establishment Clause

I mean, is anybody really surprised? This case was brought by Oklahoma's Attorney General, Gentner Drummond (right), a conservative Republican, who believes in the rule of law.  That quality has caused a series of clashes between the Attorney General and the more committed cultural warriors in his party. 

In this case, Oklahoma's Virtual Charter School Board (the Board) has exclusive authority to form virtual schools. In October, 2023, the Board voted 3-2 to approve a charter contract with St. Isidore, a charter school formed by the Catholic Archdiocese of Oklahoma City and Catholic Diocese of Tulsa. St. Isidore describes itself as an instrument of the Catholic Church committed to the Church's evangelizing mission.

The contract entered into between the Board and St. Isidore departed in key ways from the standard contract that the Board entered into with other charter schools.  While a typical  charter school must warrant that it is not affiliated with a sectarian school or religious institution, the contract with St. Isidore states that St. Isidore is affiliated with a sectarian school or religious institution.  Other charter schools have to be non-sectarian.  St. Isidore's contract specifically recognizes its right to freely exercise its religious beliefs and practices consistent with its religious protections.

On June 25th, in Drummond v. Oklahoma Statewide Virtual Charter School Board, by a vote of 7-1, with one Justice recused, Oklahoma's Supreme Court found that the Board's plan to allow for a publicly-funded Catholic charter school violates Oklahoma's constitution.  Six Justices also found that the contract violated the federal Constitution's Establishment Clause.  

The Supreme Court first concluded that the Board's contract with St. Isidore violates Article II, Section 5 of the Oklahoma Constitution, which reads:

No public money or property shall ever be appropriated, applied, donated, or used, directly or indirectly, for the use, benefit, or support of any sect, church, denomination, or system of religion, or for the use, benefit, or support of any priest, preacher, minister, or other religious teacher or dignitary, or sectarian institution as such.

That seems pretty clear, and Oklahoma courts have repeatedly construed this provision as prohibiting state funding for sectarian schools.  Consistent with the state constitution, the Act allowing for the creation of charter schools also requires that they be non-sectarian.

The Supreme Court next finds that St. Isidore is a state actor because of its reliance on state funding.  I'm not sure why this holding is even necessary to the outcome of the case, as the suit is brought in mandamus against the Board.  St. Isidore intervened.  The point of the case is that the Board should be enjoined from contracting with St. Isidore.  I suspect that finding St. Isidore to be a state actor is relevant to the Court's Free Exercise discussion, which I summarize in the next paragraph.

Finally, the Court turns its attention to the U.S. Constitution.  It first finds that the contract with St. Isidore also fails under the U.S. Constitution's Establishment Clause.  It next finds no violation of the Free Exercise Clause, notwithstanding the recent trilogy of SCOTUS cases allowing for public funding to flow to private sectarian schools for certain purposes.  The difference here is that St. Isidore would be a public school.

The ability to admit that one is wrong about the law has been excised from the DNA of many Republican politicians.  And so, Oklahoma's Superintendent of Schools, Ryan Walters, previously discussed on this blog here and here and here, without the benefit of any legal training, doubles down on his commitment to state-funded religious eduction, writing on Twitter:

It’s my firm belief that once again, the Oklahoma Supreme Court got it wrong. The words ‘separation of church and state’ do not appear in our Constitution, and it is outrageous that the Oklahoma Supreme Court misunderstood key cases involving the First Amendment and sanctioned discrimination against Christians based solely on their faith.

Mr. Walters cites to the lone dissenting Justice (whose opinion can be found here), who found that because St. Isidore is not a state actor, denying it the opportunity to run a virtual charter school violates the U.S. Constitution's Free Exercise clause.  Because the dissent finds that St. Isidore is not a state actor, the relationship between the Board and the school is purely contractual, and there is nothing unconstitutional about the state contracting with sectarian entities.  Moreover, following on recent SCOTUS cases allowing state funds to flow to sectarian schools, the dissenting Justice finds that the Majority's order that the Board rescind its contract with St. Isidore violates the Free Exercise Clause.

This is a cutting-edge argument and an opportunity to petition SCOTUS for review.  SCOTUS has gone quite far in eliminating the "play in the joints" that once characterized its understanding of the First Amendment's religion clauses.  It used to be that states could allow funds to flow to sectarian educational institutions, either to be used for non-sectarian purposes or indirectly by allowing students or parents to direct state fellowships or education vouchers to the schools of their choice.  Recently, SCOTUS has held that where public education funds are available to private non-sectarian schools, they also must be available to private sectarian schools. Will SCOTUS be willing to take the next step and allow for the creation of public sectarian schools?  Stay tuned.

Immigrants Can Sue Department of Homeland Security for Breach of Contract

As alleged in the complaint, the Department of Homeland Security (DHS) offered classes to unsuspecting immigrants at the "University of Farmington."  Members of the proposed plaintiff class paid thousands of dollars, but the University of Farmington, notwithstanding its very real-looking logo (left), was a ruse, set up to target fraud involving student visas. Once the government sting operation was exposed as a scam, plaintiffs allege they were offered neither the education for which they had paid nor a refund.  The named plaintiff paid $12,500 in tuition for courses that purportedly would lead to masters degree in information technology. 

They sued in the U.S. Court of Federal Claims, alleging breach of contract and breach of the duty of good faith and fair dealing.  That court dismissed for lack of subject-matter jurisdiction under the Tucker Act. The government claimed to be acting in its sovereign capacity and had not consented to suit.

In Ravi v. United States, the Federal Circuit reversed. The Federal Circuit diverged from the Court of Federal Claims in their understanding of a 1981 precedent, Kania v. United States, 650 F.2d 264 (Ct. Cl. 1981).  In fact, the Federal Circuit generally eschews the locution "sovereign capacity doctrine," relied on by the government at the Court of Federal Claims, finding the phrase confusing given that the government always acts in a sovereign capacity.  Kania is readily distinguishable -- it was about a government promise to a prospective witness in the context of a criminal proceeding.  The promise seemed to be that in exchange for testimony in proceeding A, the witness would not be prosecuted in proceeding B. Mr. Ravi's case lacked the criminal element as well as an unrelated case.  It was a straightforward promise from the government to provide educational services in exchange for payment.

Plaintiffs still have many barriers to overcome, and the case is remanded for further proceedings. Still, the case is important because it goes to great lengths to clarify the narrowness of the Kania precedent.  

Hat tip to Carrie Rosenbaum (right), who teaches both contract and immigration law, for sharing the case with me, and hats off to Anna Nathanson and Amy Norris for their win on the case.